KARACHI, Sept 13: On Monday, Pakistan Oilfields Limited (POL) announced financial results for the year ended June 30, 2004. The board of directors, which met in Damascus, Syria, on September 11 , announced earnings and recommended final dividend, both of which turned out to be better than expected.

The company posted a profit after-tax in the sum of Rs2.49bn, which represented earning per share at Rs18.98. The board has proposed a final cash dividend at Rs12.5 per share, which would be approved by the shareholders at the annual general meeting to be held on Oct 15 in Rawalpindi.

The POL stock, nonetheless, closed down by Rs3.70 at Rs201 on Monday's trading in 3.2m shares. The decline in share price could have to do with the overall market slump as well as price adjustment, which had climbed on rumours of a possible bonus pay out.

Last year, POL had tied stock bonus at 60pc to the aggregate cash payout at 175 per cent per share. On the current valuation, the POL share is trading on price-to-earnings (p/e) multiple of 10.6x on the FY04 earnings. The stock gives a yield at 6.2 per cent.

In a sample of four major brokerage houses, analysts at Jahangir Siddiqui Capital Markets Limited (JSCML) seemed to have hit closest to the mark in their earlier forecast of results and appropriations.

Tanvir Abid, head of research at JSCML, had anticipated net earnings at Rs2.44 billion and distribution of cash dividend at Rs12 per share. Other forecasts had been a bit less optimistic - earnings ranging from Rs2.33 to Rs2.41 and dividend forecasts varying from Rs10.5 to Rs11.5 per share.

Net sales at POL for the year ended June 30, 2004 reflected a four per cent improvement to Rs6.72 billion, from Rs6.46 billion the previous year. Government levies stood slightly increased to Rs1.03bn, from Rs1.01bn.

Exploration costs increased 64 per cent to Rs803.9 million, from Rs490 million the earlier year. Profit before tax for the year under review was down 5.3 per cent to Rs3.36 billion, from Rs3.55 billion. Including the previous brought forward surplus of Rs5.07 billion, the board had in hand Rs7.56 billion for appropriation.

The company had paid out an interim dividend at Rs10 per share last year, which was skipped for the year under review. Analysts held the consensus view that the interim for FY04 had been omitted due to the reason that POL had entered into a GSM cellular phone venture with Space Telecom (Pvt) Limited with a licence fee of $291 million. The licence was, however, cancelled as the consortium was unable to pay the 25pc down payment within the stipulated time.

Shahab Farooq, analyst at First Capital Securities, observed in a pre-result review that the top line improvement was expected at eight per cent. He stated that in spite of higher international oil prices, the top line growth was expected to be restricted owing to lower production volumes.

Production from the Meyal field suffered due to production shutdown during the year. The field has a 24 per cent share in total oil production and a 27 per cent in total gas production of the company.

KASB analyst Murad Ansari added that during FY04, POL suffered a minor setback as a result of production stoppage in well No.12 at the Meyal field, which remained closed for 16 days as the surface flow line ruptured, which was later replaced and the flow was restored.

Abdul Rasheed, analyst at Invest Cap, stated that even with additional oil and gas production from new discovery in the Pindori field, POL's production of its three main products - oil, gas and LPG - were expected to have declined in FY04.

The analyst recommended that due to lowest reserve life amongst listed E&P companies, POL needed to quickly make new discoveries to sustain current profitability in the future.

Head of research at Jahangir Siddiqui Capital Markets, Tanvir Abid said sustained profitability had been expected on the back of sky-high international crude oil prices on tight gasoline supplies in the US, speculative interest by hedge funds, mounting tensions in the Middle East and growing demand from China.

He said that though crude oil prices had receded, from all-time highs of around $50 per barrel, going forward, international oil prices could depict a firm posture as the political situation in the Middle East remained precarious and winter was almost around the corner.